Loyalty systems are conventionally used by various commercial organizations to increase customer retention as well as to increase the customer base. Examples of commercial organizations may be one of a financial institution, a credit card company, an airline, a super mart, a grocery store, a convenience store, and the like. Loyalty systems reward a customer with loyalty points in return for usage of a product or a service marketed by a commercial organization. For example, several financial institutions that issue credit cards to customers reward them with loyalty points when the customer uses a credit card for shopping, dining, and so forth. The customer is able to redeem the points on the financial institution's website for goods and services from a variety of merchants assembled by the financial institution. Further, an example of a non-financial commercial organization issuing reward points may be an airline that rewards its customers with travel miles. The travel miles may be redeemed by the customers for that airline service when they have a minimum requisite number of travel miles in their account.
Typically, commercial organizations provide a limited range of options for redeeming the loyalty points. For example, several commercial organizations provide an online store linked to their websites where the customers may redeem their loyalty points by buying from the products offered at the online store. However, this facility of redeeming points at an online store suffers from the major drawback that only a limited range of products are available for buying at the online store. A customer not having any need or interest for the offered range of products might find limited or no value in the loyalty points. This gradually leads to deterioration in the customer's perceived value of the loyalty system, which further diminishes the loyalty to the brand. In an extreme though plausible scenario, this might lead the customer to switch to another commercial organization offering a better reward system. Thus, the purpose of the loyalty system is defeated. Further, when the loyalty points rewarded by the commercial organization are not redeemed regularly, the financial liability of the commercial organization increases, affecting their financial statements.
Moreover, the link to the online store where the customer may redeem loyalty points is generally present on the website of the commercial organization. A customer who intends to redeem the loyalty points has to exclusively visit the website of the commercial organization and thereafter begin shopping using a less acquainted online store interface. The customers well set in their online shopping habits, with respect to the merchant websites that they typically visit and the shopping experience that they are accustomed to, find it counter intuitive to shop at the commercial organization's online store. Thus, a significant shift in the shopping habits of the customers is required for the loyalty points systems to function effectively.
Alternatively, a particular merchant website may collaborate with a specific commercial organization, offering a loyalty points program, for enabling paying with points. Typically, in this scenario, the customer may purchase products using loyalty points accumulated with the specific commercial organization for any product on the merchant website. However, the major limitation of such an arrangement is that it requires tight integration between the merchant and the commercial organization. This limits the use of the loyalty points to a small set of merchant websites.